Cash out refi vs mortgage on a property?

[Nick Zias]

Hello Everyone, So I was thinking about something this morning and maybe I am drawing a blank. (The following scenarios are for rental properties.) Scenario 1: Lets say you find a house that you want to purchase for 100K and do some repairs to it. If you have the 100k you could buy it cash, add value and then use a cash out refi to go buy another property. Scenario 2: You could take a mortgage out on that same house with a 20% down payment, then just use the 80k you have from not buying the house 100% cash and go make a downpayment on another property. In both situations you have a loan that has to be paid back. So how does using a cash out refi benefit someone? Once you use that cash out refi you are essentially taking a loan out on the house and now your monthly rental income will take a hit. So why not just take out a mortgage to begin with?

[Jeff Dulla]

@Nick Zias if there is nothing wrong with the property to stop you from financing, then I would finance up front. That will allow you to conserve cash - which you can read a bunch of the posts on here as to why that's important - but very simply, then you can pay contractors with the cash you have on hand. 

I think you are also mixing this up with why you would potentially refinance again when it's all done. That is because the value then would have hypothetically increased allowing you to pull more or all of your cash back out of the deal. Allowing you to line up your next investment purchase.